As the government prepares for the 55th GST Council meeting, expected to be held in November 2024, the council's appointed Group of Ministers (GoM) has commenced discussions. The GoM on "boosting the real estate sector under GST," led by Goa's Chief Minister Pramod Sawant, is set to convene on September 24.
According to sources, the upcoming meeting is expected to focus on several critical issues and priority areas previously identified in GoM meetings. Following these discussions, the 54th GST Council, which convened in New Delhi on September 9, had tasked the GoM with providing more in-depth deliberations.
A major issue on the agenda is the "application of GST on properties purchased within group housing or commercial projects developed by a builder." The key question before the GoM is whether GST should be applied to the total payment made to the builder or solely to the construction cost, excluding the land cost, sources indicated.
Sources further mentioned that other issues up for discussion include: "Should GST be exempted on long-term leasing of industrial plots? How should 'long-term' be defined—should a 30-year lease be considered long-term? Additionally, should GST be exempted on the redevelopment of group housing or buildings if ownership remains unchanged?”
The GoM is also likely to examine "whether the Rs.45 lakh threshold for defining affordable housing in metro cities, particularly in Mumbai and Delhi NCR, should be reassessed, and if affordable housing should receive distinct GST treatment or concessions," sources revealed.
Since its formation, the Group of Ministers (GoM) tasked with boosting the real estate sector under the GST regime has not yet presented any conclusions to the GST Council. The GoM was established following a recommendation by the GST Council during its 32nd meeting on January 10, 2019, but limited meetings have hindered the progress of its report for the Council.
Initially chaired by Nitin Patel, then Deputy Chief Minister of Gujarat, the seven-member GoM held only two meetings, on February 8, 2019, and November 21, 2019. The third meeting occurred only in August 2024, after both the composition of the GoM and its convenor were changed.
It remains uncertain when the GoM will conclude its discussions and present its final report to the GST Council.
Gyanendra Tripathi, Partner & Leader (West), Indirect Tax at BDO India, highlights key expectations from the GoM on real estate. These include reassessing the current one-third deduction for land value based on location, particularly in metro cities with higher land costs, and considering deductions based on actual land value where available. Additionally, there is a need for clarity on GST issues related to redevelopment, Joint Development Agreements, and Transfer of Development Rights.
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